The Aussie is favored following the release of upbeat China data. The escalating tensions between China and Australia look to be capping gains.

The data was released at 01:45 GMT showed China’s Caixin Manufacturing PMI, which surveys the small and medium-sized export-oriented units, rose to 54.9 in November versus expectations for 53.5 following October’s 53.6. The data has come a day after government PMIs showed a continued rebound from the world’s second-largest economy from the corona virus-induced slowdown seen earlier this year.

Australia’s Building Permits, or the number of approvals for new construction projects, rose 14.3% year-on-year in October following September’s 8.8% jump, the data released early Monday showed. Australia’s current account surplus narrowed to AUD 10 billion in the third quarter from AUD 16.3 billion in the second quarter.

Australian Prime Minister Scott Morrison has demanded an apology for a senior China government official’s tweet showing a doctored image of an Australian soldier killing an Afghan child. China has placed tariffs on key Australian exports like wine in response to what it claims are hostile policies from Canberra, according to Axios.

Adding to the market mood is the US covid stimulus, as indicated by Fed Chair Jerome Powell and US Treasury Secretary Steve Mnuchin in their prepared remarks for today’s testimony. While Fed’s Powell identified moderating economic growth as a risk that needs an economic push, Treasury Secretary Mnuchin directly urged Congress to use $455 billion from CARES Act to provide the much-needed relief.

Also to be noted that Moderna’s readiness to apply for the emergency usage of its virus vaccine to the US Food and Drug Administration (FDA) also favors the risk-on mood. As a result, stocks in Asia-Pacific join the US 10-year Treasury yields to portray the market optimism.

AUD/USD 4 Hour Chart:

Support: 0.7317 (S1), 0.7294 (S2), 0.7248 (S3).

Resistance: 0.7385 (R1), 0.7430 (R2), 0.7453 (R3).

As of now, AUD gains strength against greenback amidst the existing catalysts, we expect a bullish trend for AUD/USD. Whether US ISM Manufacturing PMI makes any future change is yet to be seen.